The role of innovation in promoting faster economic growth is well established in economic theory. In the long term improvements in economic wellbeing can come only from innovation. Often we associate innovation with new technology or new products, but in reality a significant amount of innovation is also about new ways of producing the same old things i.e. better management and better organisation of production. We have overlooked the key role that improvements in management and efficiency in operations play in promoting economic growth. In fact, poor management on the part of the government inhibits growth. Even in the private sector, efficiency can be considerably improved. Competition drives efficiency in the private sector. But there is no incentive to efficiency in the government administrative machinery.

Role of good administration

in promoting growth

We had a reasonably well functioning public administration at the time of Independence. But with the social mobilisation of 1956, the people expected too much of the State and from the administration. Consider the problem of land settlement. Distribution of lands in the Dry Zone could not be done as fast as the Members of Parliament wanted since there was a procedure to be followed such as mapping, surveying, blocking out the lands, selecting allottees etc. But the MPs were in a hurry and dispensed with such procedures and encouraged persons particularly their supporters to encroach illegally on State lands including forests. So the land alienation and settlement became a disorderly instead of orderly process.

The issue of water from irrigation reservoirs has necessarily to be an orderly process. Water had to be distributed fairly and in order to maximize the use of water for as large an extent of land as possible it was necessary to impose a common cultivation schedule which was determined at a Cultivation meeting by majority decision. Once a decision is taken it should be implemented. But the process of implementing such decisions has broken down as the Members of Parliament and politicians intervene in the process. How does one restore the discipline required in such activities by the people? The law is there but its implementation is hamstrung due to political interference. The devolution of power to the Provincial Councils and the Pradesiya Sabhas will not change this situation and may even make it worse unless and until a sound administrative framework functions at these levels.

We have misunderstood the role of Members of Parliament and politicians in public administration. There has to be a clear demarcation between the functions of the Members of Parliament, the Provincial Councils and Pradesiya Sabhas. In fact the MPs should have no say at all in the affairs of the latter institutions. It is the Governor who is the representative of the government and not any MP. He, too, must respect local sentiment and opinion and not seek to over-ride the decisions of the Councils and the Pradesiya Sabhas at the instigation of MPs. MPs are legislators and not administrators of their electorates. They should expose any abuses or grievances of the people of their electorates in Parliament and call upon the Ministers to rectify them without intervening themselves. They should refrain from seeking to interfere in decisions of local level bodies or even decentralised units of the government. Such interference, a legacy of the 1956 Bandaranaike regime, has caused confusion and breakdown in local level administration. It is necessary to keep the MPs away from local administration. The demarcation of the respective roles of the elected MPs, the Provincial Councillors and the Pradesiya Sabhas is necessary. Too many cooks spoil the soup.

Policy and Administration

There also has to be a separation between policy and administration while upholding the principle of accountability of officials to the chief executive who is best elected––Chief Minister, Chairman or Mayor. This principle is manifested at the national level with the overall power of the Executive President. What is not clear even at the national or local level is the demarcation of functions between the Executive and the bureaucracy. There should be a separation of the mass of routine decisions and the important decisions which mark a change in policy. The latter is the proper purview of the elected Executive while the former is matter for the bureaucracy. Any interference in the latter in breach of laid down procedures and practices will only lead to confusion and erosion of the morale of the bureaucracy, whether local, provincial or national. But laws alone aren’t enough. Good management depends on the managers and if the managers who are elected politicians whether President, Chief Minister, Chairman or Mayor chose to do otherwise, the management of the institution concerned will suffer. The decisions of the President, Chief Minister or Chairman must however be subject to scrutiny, discussion and endorsement by an elected assembly––Parliament, Provincial Council or the Pradesiya Sabha. The policy making function has to be distinguished from the operations of the policy. Policy making sets objectives, which the administration (by the bureaucracy) strives to realise. Policy-making is a thinking function or a top level function involved in planning, setting objectives and policies; whereas administration is a doing function or lower level function engaged in the execution of the policies.

Elected members must make the rules and leave them to be implemented by the administration holding the latter accountable for complying with the rules. Of course a hard and fast distinction and separation into two water-tight compartments is not theoretically possible as H. A. Simon has pointed out. But this distinction and the need to comply with it are based on years of experience in public administration practice. From this distinction arises the recognition that administration lies outside the proper sphere of politics. Administrative questions are not political questions. Although politicians set the task for administration they should not be allowed to manipulate them for political gains. This problem arose after SWRD’s election victory in 1956 and is still with us. President J. R. Jayewardene insisted that politicians should not exercise any influence in the decisions of the police. But he did not refer to the general administration in his order. But unless this issue is resolved there cannot be good governance and this situation will adversely affect economic development.

Regulatory Environment also a barrier

We lament that there is not enough foreign direct investment although there are immense opportunities available since the end of the war and the return of peace and normalcy. But why don’t companies find it attractive to invest in our country with potentially many opportunities and what might look like high returns? The answer has to do with the perceived rate of return to that investment and the associated risks. Return and risk are ultimately determined by a long list of factors that are put together under the label of institutions.

There are the legal institutions (the rule of law, property rights), political institutions (stability of policy, decision making), economic institutions (regulation, taxes, customs duties and procedures), social norms (that will determine what is acceptable or not), culture (entrepreneurial spirit, risk taking behaviour, attitudes to work). In short, the environment for doing business matters and it matters a lot. We once had an independent judiciary and a responsible Police which together implemented the Rule of Law. Many people complain about laws delays. Someone suggested that the authorities entrusted with managing the Judiciary lay down a minimum quota of cases to be disposed of a month. Someone also suggested that the calling of the Roll be entrusted to the Registrar to save time for the Judges. The former Minister Felix Dias Bandaranaike passed the Administration of Justice Law which simplified procedures. But it was repealed by the UNP of President J. R. Jayewardene. The Judiciary must be accountable to the people but the Contempt powers exercised by the Courts prevent the expression of public opinion. The modern law of Contempt of Court should be introduced as in the UK and India. I saw a draft which I think was prepared by Kishali Pintoe Jayawardene. A Citizens’ Commission for Judicial Reform 2005, a Civil Society Initiative made a number of recommendations which should be looked into and adopted.

The World Bank published the report titled "Doing Business". It records several key characteristics of the business environment for over 170 countries. Let us look at one simple example. It only takes 2 procedures and about 2 days to start a business in Australia. In Brazil, there are 17 procedures and it will take 152 days to establish a new company. Examples of other indicators are access to credit, observance of property rights, easiness of closing business, etc. There is a very strong correlation between regulation and institutions on the one hand and economic development on the other. Rich countries all have institutions of high quality while the poor countries do not. This measure of institutional quality provides the government with clear guidelines on what to do to speed up reforms and growth. The goal for the government should be to set up the right environment for business rather than manage investment. Once the environment exists, a big chunk of the uncertainty about future payoffs is gone, individuals and firms local and foreign will invest and growth will pick up––private sector growth not low productivity government growth.